In what could be termed as a watershed moment for Indian tax reforms, the government recently fixed a five-tier tax structure of 0 %, 5 %, 12 %, 18 % and 28 % for different goods and services under the proposed GST (goods and services tax) regime.

While details pertaining to various segments and their respective tax rates are still awaited, prima facie it appears most of the FMCG companies are likely to gain from the new tax rates.

In a sectoral impact analysis, ICICI direct said, “We expect a majority of personal care and household items including toothpaste, detergents, dishwash, hair oil, shampoo, soaps to fall in the 18 per cent slab, thus providing a big boost to related FMCG companies." Currently, the tax levied on these companies stands at around 25-27 per cent.

Under the new structure, the government has proposed a rate of tax rate of 28 per cent on tobacco products in addition to the cess (excise duty remains same). However, there is no clarity on the quantum of cess to be levied. Still, this provides relief to the cigarette companies, as the final tax incidence is expected to be lower than the expectation of 40 per cent demerit tax.

The brokerage firm has a positive stance for logistics and warehousing companies as well. In its words, "With the implementation of GST, the efficiency of the system will also improve in terms of logistics and warehousing. Additionally, the premiumisation trend across personal care and household items and expected increase in penetration supported by efficiency in the supply chain led by GST would drive the sector."

Below is how stocks of top FMCG companies performed over the past one year -